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Why e-retailers are turning to bricks and mortar stores

With a surge in retailers moving online and reports of consumers turning away from malls to online shopping, such a move might seem like a step backwards. Actually, it is quite the opposite, with marketing becoming more sophisticated, aiming to provide the customer with an integrated and seamless shopping experience both online and offline – in other words an omnichannel experience.


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Published by Think Business from NUS Business School
on 15 Aug 2019

Why e-retailers are turning to bricks and mortar stores

Singaporean online fashion darling Love, Bonito recently opened its largest physical store in the new Funan Centre.

It’s the brand’s third brick-and-mortar store in Singapore, taking the total in the region to 19.

With a surge in retailers moving online and reports of consumers turning away from malls to online shopping, such a move might seem like a step backwards.

Actually, it is quite the opposite, with marketing becoming more sophisticated, aiming to provide the customer with an integrated and seamless shopping experience both online and offline – in other words an omnichannel experience.

After all, some consumers do brief research on their smartphones before buying instore, whilst others browse products at stores before buying online.

Brands understand and are responding to this. Omnichannel marketing has been picking up in other parts of the world, in Europe, the United States and Japan. Amazon, Sephora, Nike, and Uniqlo have achieved some success with this approach.

Local luxury goods store Reebonz and grocery-delivery company honestbee have also taken the leap.

“Brands are opening brick-and-mortar stores in the hope that diversifying sales can bridge and enhance the consumer’s journey.”

Even retail companies that started as e-commerce plays are discovering limits to their online growth as consumer adoption plateaus. The online marketplace can also be crowded, with advertising expensive and some consumers reluctant to part with payment and personal data.

Diversifying sales

Brands are opening brick-and-mortar stores in the hope that diversifying sales can bridge and enhance the consumer’s journey. But this approach will only work if the brand has already built up an online reputation and can drive traffic to their physical stores.

This is what probably makes Amazon Go’s checkout-less stores so popular in the US.

It is a great idea for brands that aim to sell a certain lifestyle and the fashion that comes with it. For products like clothing and jewellery, for example, consumers prefer to touch, feel and try the products for size and fit.

Seeing how it looks on a model on a smartphone is simply just not enough. Being able to try the outfit to see how it looks on you and having the option to mix, match and accessorise is precisely the experience shoppers want.

And being able to buy it right away offers instant gratification. No waiting for shipping or agonising over shipment tracking.

Extending the brand

Location is key to any brick-and-mortar store’s success but it can be pricey to open a storefront in a high-footfall venue like Orchard Road.

But habitat by honestbee is breaking the mould. Its location in Pasir Panjang might help catch the weekday work crowds near Mapletree Business City.

But its clincher is the experience at its high-tech, cashless supermarket and dining concept – which is unique enough that people flock there to shop and eat even on evenings and weekends.

A physical store for an e-commerce company serves three main purposes.

First, as an extension of the brand, it creates consumer visibility and top-of-mind recall when consumers look for relevant products. This halo effect drives shoppers to its online shop.

Second, its physical venue allows for consumers to try, test drive and troubleshoot new products.

Third, running an online business involves fulfilment costs that range from warehousing, staff and delivery. Having a physical store can even cut operating costs since it can carry smaller volumes of items, while also acting as a point for pick-ups and returns.

Crowded market

Singapore is moving towards becoming a smart city with pervasive technology. Businesses that venture online have to contend with a crowded and competitive marketplace.

Having a physical presence provides brands with the exposure and consumer insights to distinguish themselves from the pack.

While this approach may work well for popular brands, smaller and less established players will find they have less bargaining power – for instance, when it comes to negotiating rents.

They may need more time and creativity to generate a sufficiently high level of consumer awareness for their brands online before making a huge investment into opening and operating a permanent physical store.

Guerrilla marketing tactics, and the use of pop-up stores, can allow brands to tinker with this space and engage customers – to launch new products, and provide exclusive services.

The omnichannel model is also an opportunity for online brands to curate a more exclusive and focused shopping experience.

Through personalised services, customers who used to shop online only can now enjoy a bespoke experience. Love, Bonito’s new store will feature instagrammable spots, alteration services and personal stylists.

While businesses cannot avoid having on online presence, they also cannot be wholly reliant on it. Brands have to understand what different segments of customers want and how they shop, both online and offline, and target them accordingly.

As the lines between our offline and online worlds blur, consumers will demand a delightful shopping experience that straddles both from the brands they buy.

This makes it imperative for retailers to provide timely and useful information, both online and offline, and respond to their customers.

How brands will shape this space is something worth watching.

 

This article was first published on NUS Think Business, on 26 July 2019. Information is correct at the time of publication.

Last Modified Date: 02 Aug 2019